The Survival and Dominance of Car Manufacturers is Far from Certain

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I am going to share with you another excerpt from the 37-page “book” I wrote about Tesla, Elon Musk, and the EV industry. If you would like to read the full paper, click here. (I’ll also include a PDF and an ebook of the whole paper). If you don’t want to strain your eyes, but would rather strain your ears, I divided the Tesla “book” into two parts. You can listen to the second part here, read to you by a professional narrator. Think of it as an audiobook, or an audio-article.

What you really should have done in 1905 or so, when you saw what was going to happen with the auto is you should have gone short horses. There were 20 million horses in 1900 and there’s about 4 million now. So it’s easy to figure out the losers; the loser is the horse. But the winner is the auto overall. 2,000 companies (carmakers) just about failed.

- Warren Buffett, speaking to University of Georgia students in 2001

Can traditional automobile companies successfully transition to making electric vehicles (EVs)?

EV sales account for a tiny rounding error of total global car sales. Let’s mentally transport ourselves to the late 1800s, when the streets were still busy with horse-drawn carriages and the occasional passing automobile scared a horse or two.

If you cannot relate to a century-old analogy, let’s go back to something that happened just a bit more than a decade ago. In June 2008, when the iPhone 3G was introduced, Nokia was still the largest phone maker in the world. What we did not know at the time was that Nokia was actually the largest dumb phone maker and that Apple was about to become the largest smartphone maker – a small but crucially important nuance. What we did know at that time was that smartphones were the future.

In theory, nobody knows more about making cars than the traditional internal-combustion engine (ICE) carmakers – the General Motors of the world – and thus EVs made by these companies should be the ones busying our streets a decade from now. A natural continuity from what we already know may be the easiest cognitive model for us to process, but it is not always the most accurate one.